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How to manage & overcome financial anxiety

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Oscar Wong/Getty Images

Financial stress and anxiety can cause trouble in your life, manifesting in various ways. Almost everyone may feel stressed about money from time to time. However, this anxiety has the potential to compound and can disrupt your daily life, causing you to lose sleep.

Here's the good news: You can strategize and take steps to help alleviate—and maybe even overcome—that stress. Read on for more information about money-related anxiety and a list of steps you can take to ease it.

What is financial anxiety?

In the most basic sense, financial anxiety is worry and fear about your financial situation. Research from the American Psychological Association showed that 65% of Americans report money is a significant source of stress in 2022, up 4% from 2021. If you're currently feeling this sort of stress, you're not alone—many Americans feel like you do right now.

There are two types of financial anxiety for many people: everyday financial stress and financial stress that's triggered by an event.

Everyday financial stress

Most people encounter everyday financial worry or stress at times. You know the feeling if you've struggled to pay off your debt while saving for retirement, got hit with an emergency bill or been shocked by a credit card statement.

These events can undoubtedly cause stress. You may have to tighten your belt for a little while to cover these costs, but as you get a handle on them, that stress can start to dissipate.

Some common examples of everyday stress may include:

  • You're struggling to manage your finances. You're finding it hard to cover all of your bills on time.
  • You have a lot of debt. Student loans and other debt may feel overwhelming, and you may struggle to pay them or see a light at the end of the tunnel.
  • You have unhealthy spending habits. Sometimes stress can end up driving you into overspending, exacerbating existing financial unease.
  • You don't have an emergency fund. An emergency fund can help cover unexpected bills or pay expenses if income can't cover them.

Financial stress triggered by an event

Another common type of financial anxiety comes from a change in your life. The last few years have been a strong example: With the COVID-19 pandemic, many people lost their jobs, faced reduced hours or got sick—dramatically impacting their finances.

These types of stress, from the loss of a job, high inflation or market volatility, can leave people to worry over their finances during the short to intermediate term.

Some common examples may include:

  • You lost your job. It's been difficult to find a new one, and a loss of income—especially over a few months—can set you back financially.
  • You've experienced losses in the market. Watching your retirement investments go down during a market dip can certainly induce anxiety.
  • You have serious medical expenses. Many people struggle with medical bills after getting sick, derailing savings or depleting emergency funds.
  • You don't feel confident about the future. Instead, you worry that you don't have enough for retirement or your kids' college funds.

The Consumer Financial Protection Bureau offers an online quiz you can take to help determine your financial well-being.

How to start managing your financial stress

Overcoming financial anxiety can feel daunting, but you can take steps to start turning things around, including building better money habits.

First, realize it's a process that takes time. You likely won't be able to turn things around overnight, but consistently moving forward in the right direction every day can start to make a difference.

Here's where to start.

1. Identify the underlying causes of your stress

Many people have different relationships with money, which often unknowingly trigger stress. You may need to dig deeper to get to the source of these anxieties.

For instance, the way your parents dealt with money or your experiences with it growing up could still play a role in how you manage your money today. Or maybe you feel like you don't have the financial know-how to make good decisions. If you've lost a job in the past, that experience could affect your behavior around finances now.

Working with a counselor or therapist may help you find some of the underlying causes of your financial anxiety, which can help you begin addressing them.

2. Your current financial situation

This part may feel scary, but it's hard to develop a plan if you aren't sure exactly where you stand financially. Start by tracking your spending for a month or two, which can help you create a baseline budget.

Also, review your debts. Look at your current bank and credit statements to note the amounts you owe, and identify which have high interest rates. That can help you determine which bills you may want to tackle first.

3. Look at your top sources of stress

Once you have a complete picture of your finances, identify a few key areas driving most of your stress. Those may be the areas you want to work on first and create a plan around. Then, as you start to handle those top fears, you can continue working down the list.

For example, if you have a lot of anxiety about losing a job, you may want to focus on building your emergency fund. Having three to six months' worth of expenses saved can help alleviate some of your fears about not making ends meet if you happen to lose your job.

4. Create a plan

Building an action plan can help you start to feel better. Sometimes, not knowing exactly what to do ends up being a large source of stress. You may want to start small: Get a monthly budget and stick to it.

Then, determine how to start managing your debt. For example, you may want to start paying down the debt with the highest interest rates (known as the avalanche method) or pay off the smallest debt first to get some wins and work your way up to the next smallest (the snowball method).

5. Track your progress

Improving your finances is often a lifelong process, and detailed and consistent tracking can help. It lets you see progress toward your goals and serves as a warning sign before things get off track.

Financial stress can overtake your mental health. So, as you start tackling your finances, it's also important to let yourself feel good that you're making progress. When you pay off a bill, improve your credit score, or add to your emergency or retirement funds, pat yourself on the back for a job well done.

6. Speak with a financial advisor

If you aren't sure where to start with your plan, consider speaking with a financial advisor. Your financial advisor will navigate your finances with you, listen to your fears and short- and long-term goals, and help you create a plan to get your finances in order.

Together, you can work on your action plan. When you meet with your financial advisor consistently, they can help you stay on track and make any needed adjustments over time.

Get in touch with a local financial advisor to start working on your plan and lowering your stress about money.